What’s a hospital worth? The decision to close a downtown institution

Atlanta Medical Center is more than a hospital to G. Lynne Alston-Leonard. For 20 years, the Old Fourth Ward resident has visited friends there as they healed or lived their last days, walked to doctor appointments on its campus, and watched its employees come and go from MARTA buses. She cannot fathom how Wellstar Health System is about to close what she sees as an anchor of community life. 

“Don’t get me wrong, I accept and understand that it’s a business,” she said. “I don’t understand how you hemorrhage money to the point of closing and not dealing with the community.”

When Wellstar Health System closes the century-old AMC come Nov. 1, it won’t just be shutting an emergency room door and chopping away at Georgia’s number of hospital beds, say experts and community members. It will be changing the city.

Georgians are used to the drumbeat of rural hospital closures. But urban and metro-area hospitals are now closing as large corporations buy health care institutions, focusing on profits and losses rather than solely community service.

Metro areas such as Philadelphia, the San Francisco Bay area, the Chicago suburbs, and now Atlanta have endured the loss of big hospitals with financial troubles. In those metro areas, as in rural communities, decisions to close are business driven and often not made locally. Local institutions become line items that are part of a corporate strategy, experts say. 

On Aug. 31 Cobb County-based Wellstar announced plans to close AMC. That announcement came just four months after it turned AMC South in East Point into an urgent-care facility named Wellstar East Point Health Center, halting inpatient care there and shuttering the only emergency room in Fulton County south of I-20.

What will vanish with the latest closing are healthcare services to tens of thousands of people, downtown jobs for highly-paid professionals as well as blue-collar workers, and the millions of dollars spent by a large institution and its employees on goods and services in the area.

More than 1,742 employees — 1,314 of them full-time — will look for work or leave Atlanta for other Wellstar hospitals. That’s a bigger number than the entire corporate headquarters head count of national companies based here like Aaron Rents or CNN. It’s more jobs than NCR originally brought to Georgia from Ohio when it moved headquarters.

Wellstar has said it tried everything possible, but folded in the face of insurmountable financial losses. All concede AMC needed help. But given Wellstar’s wealth as a hospital system, some are skeptical of its dedication to solving the problem.

A money loser

Wellstar points out it has invested in AMC in at least two ways: actual investments that improve the aging facility, and extra money to keep operating an unprofitable location. Altogether, Wellstar says it invested $350 million in AMC.

It replaced the failing elevators, bought medical equipment and computer systems.

Even critics of Wellstar’s approach say the true cost to modernize the decades-old building and make it attractive to doctors and patients likely stretch far beyond that.

Wellstar concedes it has large amounts of money in reserve, but says it needs to keep those reserves for a rainy day, and in order to get good rates when it borrows. For example, this year it told lenders it wanted to borrow $200 million to put towards a new building tower at its flagship in Marietta, Wellstar Kennestone Hospital.

“Wellstar is a non-profit organization, and the health system’s net revenue is reinvested into our mission. We must operate responsibly,” Wellstar said in a statement released Thursday to The Atlanta Journal-Constitution.

In answer to criticism that it is reluctant to serve low-income patients, the statement pointed out the large numbers of patients it sees in other hospitals who have no insurance, as well as patients whose insurance reimburses Wellstar below its standard rates.

“As the largest safety-net provider in the state, Wellstar remains firmly dedicated to advancing our mission to enhance the health and well-being of every person we serve,” the statement said.

Wellstar said it looked in vain for a buyer or government funding, although several government leaders reacted in shock to Wellstar’s announcement and said they were given no warning of the closure.

For Nancy Kane, adjunct professor of management at Harvard University’s T.H. Chan School of Public Health, what sticks out is the relative health of Wellstar Health System overall, with a $2 billion buffer to spend or save at its disposal.

“I’ll tell you, this is one of the best 2022 financials that I’ve ever seen during COVID for a health system; most of them are losing their shirts on that labor problem,” Kane said.

Wellstar appears to have the money to fix AMC, if that were their priority, she said. “Wellstar itself is doing fabulously well, considering the COVID epidemic and the labor problems nationwide.”

When it comes to individual hospitals, Wellstar said in its public announcement of the closure that it lost $107 million on Atlanta Medical Center over the last year, a number that surprised Kane for being so high given what she saw in other records.

In the two years prior during the pandemic, Wellstar reported to federal agencies annual losses for AMC of $36 million and $47 million; in the three years before that, losses ranging between $1.5 million and $5 million. Operating losses mean it took more money to run the hospital than came in from patients, insurance payments and aid.

Wellstar points out that the different forms call for different methods of accounting.

Like all Georgia hospitals, Wellstar must cope with one of the nation’s highest rates of uninsured patients. Georgia is one of 12 states that have not expanded Medicaid to all its poor adults. Wellstar AMC has claimed more than $262 million in uncompensated indigent care in the most recent year reported, 2019 to 2020.

According to Wellstar officials, “Our expenses for supplies and labor have soared since the pandemic began and revenue has declined, which are the common financial headwinds straining many healthcare providers right now.”

The labor shortage is gutting hospitals nationwide. AMC has 460 beds, only about 200 of which are staffed right now, health officials say. Closing AMC will allow Wellstar to beef up staffing at its other hospitals.

A history of charity

Born at the turn of the century as an infirmary, Georgia Baptist Hospital moved to Boulevard and what was then East Avenue a century ago and was later renamed Georgia Baptist Medical Center. The Georgia Baptist Convention, which oversaw the original hospital, eventually sold it in 1997 to a for-profit company, Tenet Healthcare, citing Tenet’s “orientation toward community health care.” In 2015, Tenet sold AMC as part of a package of five hospitals to Wellstar, citing a “deep respect for WellStar’s commitment to the Atlanta community and its people.” Some of the five were lucrative.

“Since we began exploring the sale of our Atlanta facilities, we sought an operator with the leadership and capability to continue delivering high-quality care for many years to come. We have a deep respect for WellStar's commitment to the Atlanta community and its people."

- Tenet Healthcare Vice Chairman Keith Pitts in 2015, on selling Atlanta Medical Center and four other hospitals to Wellstar Health System

Both AMC hospitals needed big infrastructure fixes, perhaps $200 million each. The overweening problem, observers say, is that both serve a disproportionately lower-income population. To many observers, that also underscored the importance of staying.

As a patient and fan of AMC, Alston-Leonard agrees. She notes the patient population was disproportionately Black — nearly 70% of inpatients, according to hospital data. AMC is a 15-minute walk from the birth home of Martin Luther King, Jr.

“Well the bottom line is, that just adds to the disgrace that we have as a country, in how broken our healthcare system is,” she said.

While rural hospital closures may gut an entire town, urban hospital closures reshape a city, often in ways that make it harder for the less affluent.

The roughly 700 doctors and other high-skilled professionals will likely find similar positions quickly, said Michael Wald, former Labor Department economist. But support staff — especially those who rely on public transit — will have a greater challenge, he said.

And the stress on other hospitals to pick up AMC’s former patients will be expensive, said Bill Custer, a Georgia health care economist.

“It is more expensive for those other hospitals now to increase capacity,” Custer said. “There will be an impact on access to healthcare, on wait times and on the level of services.” Other hospitals will need assistance, whether it’s from an expansion of Medicaid or from other government support, he said. “Our healthcare system in Georgia is underfunded. One way or another the Georgia taxpayers will cover some of this bill.”

Hospitals that will feel the crush of AMC’s patient population are Grady Memorial Hospital, Emory University Hospital-Midtown and Piedmont Hospital.

Just 15 years ago, similar fears surrounded the specter of Grady itself closing. Georgia’s largest hospital, owned by Fulton and DeKalb counties, was on the brink of collapse, with broken records systems and about $60 million in debt. A task force of prominent Atlanta business interests jumped in to restructure the hospital’s governance and finances. A similar rescue does not appear to be likely for the Wellstar-owned AMC.

A spokesman for Gov. Brian Kemp’s office said Friday that discussions are underway to develop a long-term plan to ensure healthcare options are kept in place for the city. The discussions involve shifting state and federal funds to Grady rather than seeking to keep Atlanta Medical Center open, according to several officials with direct knowledge of the negotiations.

Relationships

Dr. Daniel Byrd, a primary care doctor with an office on the AMC campus, says his patients rely on the facility. Wellstar has yet to tell him anything specific about his lease, but he’s heard from colleagues that the company is letting their leases end when they run their course. At 83, he’s not sure if he will relocate or just retire.

Making Byrd move his practice would be like dislodging an artery, he said. His patients may not be able to find him or get to him — a problem especially for people who don’t have cars. And up until now, he’s been able to funnel patients needing inpatient care to AMC, no matter their insurance status, because of his relationships there.

“I can call,” he said, “and tell them, ‘I’ve got a patient coming in. Here’s what’s going on.’ So I can do that. But I can’t do that to other hospitals. They don’t know me.”

Mental health advocate Chris Johnson, interim director of the Georgia Mental Health Consumer Network, said AMC and Grady provide rare inpatient hospital beds for psychiatric patients.

“Fulton County is one of the most underserved areas in the state” for psychiatric hospital needs, he said.

Johnson doesn’t pretend that AMC solved that problem. But he can’t imagine what it’ll be like at Grady to see AMC go.

“We want to be this great city of movie stars and rappers, all the glitz and glam,” Johnson said. “But we don’t want to support the basic needs of the people who live here who do the hard labor that lets the city function and grow.”

[This article was originally published by The Atlanta Journal Constitution.]

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